Babel Finance Mulls New Token Launch to Repay Creditors

Babel Finance, the Hong Kong-based crypto lending platform, plans to introduce a decentralized stablecoin that will be used to repay the firm’s creditors, according to a Bloomberg report.

The firm’s restructuring efforts are helmed by Babel co-founder Yang Zhou, who is now the company’s sole director, and revolve around a decentralized finance (DeFi) project called “Babel Recovery Coins.”

It’s pitched as a dual token ecosystem with a fully reserved stablecoin HOPE and another token called Light Token.

The plan outlined in the filing will see Babel creditors repaid with revenue generated through the “Babel Recovery Coins” project, where the HOPE stablecoin will be initially backed by Bitcoin (BTC) and Ethereum (ETH), with more coins to be added at later stages.

Babel Finance raised $80 million at a $2 billion valuation in May 2022 but suspended redemptions and withdrawals the next month, citing “unusual liquidity pressures” after being caught by the meltdowns of the Terra ecosystem, Celsius Network, and Three Arrows Capital (3AC).

It was reported that Babel lost 8,000 Bitcoin and $56,000 Ethereum, cumulatively worth approximately $225 million. The crypto broker, however, estimates a total of $524 million worth of Bitcoin, Ethereum, and other cryptocurrencies owned by the company and its customers were lost—mainly as a result of risky trading activities instructed by Babel co-founder Wang Li.

Wang was ushered out from the company’s leadership in December last year.

The firm is now planning to file a moratorium of protection to the high court of Singapore, asking its creditors to hold off on taking further action against the company for a period of up to six months.

Babel joins list of debt token suppliers

Restructuring attempts via token issuance is not new for the crypto industry.

Bitcoin exchange Bitfinex launched the LEO Token in 2019 to cover $850 million of losses suffered from its dealings with Panama-based Crypto Capital, while also pledging to use at least 80% of any of the Bitcoin it recovered from the infamous 2016 hack to purchase LEO in the open market and burn it.

In January this year, bankrupt crypto lender Celsius Network brought up a new restructuring plan for a discussion with Celsius’ creditor groups, which included the possibility of issuing a new token that would let the firm raise funds and repay its creditors.

Celsius’ attorney argued at the time that a properly licensed and publicly-traded company, such as a revived Celsius, would be able to raise more money for creditors as opposed to simply selling its limited assets at today’s prices.

Even Sam Bankman-Fried, the disgraced founder of crypto exchange FTX, said last December that a restructuring plan centered around the “new FTT token” distributed to creditors “would be a productive path for parties to explore.”

The new FTX management, it appears, is not too keen on such an option.